Simple vs Compound Interest for an Investment

The magic of compounding can work to your advantage when it comes to your investments and can be a potent factor in wealth creation. While simple and compound interest are basic financial concepts, becoming thoroughly familiar with them will help you make better decisions when taking out a loan or making investments, which may save you thousands of dollars over the long term.

For the most part, nowadays all savings vehicles use compound interest while many loans use simple interest. When looking at savings products, be sure to pay attention to how frequently the interest compounds. You’ll see things like daily, monthly and annually. The more frequent the compounding, the quicker your money will grow. Ideally you would want compound interest to compound daily. That is how the IRS does.

TValue software offers 13 different compound methods so you have the flexibility to calculate interest for any situation.